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Have you had closing day surprises concerning your rate and closing costs? Unfortunately,
surprises are not a unique experience. With Colorado choosing to leave its mortgage industry
unregulated, many borrowers are finding themselves on the paying end of exremely high costs
and rates. Disclosure is the safeguard that protects many homeowners from paying outrageous
fees come closing day. However, all too often borrowers are lead to believe in one set of
costs and come closing day are given another. This bait and switch technique is used often
to bring business in the door and borrowers are left with little recourse at the closing
table. If one of the following sounds familiar, you are probably getting a lemon mortgage. Look over each scenario and find out a few mortgage broker's tricks of the trade.
Answer: There are many ways for a broker (lender) to make money on a loan. There are 3 places alone on the Good Faith Estimate: the Origination Fee, Discount Points and Mortgage Broker Fee. Most people believe that the origination fee and "points" are the same, but in fact they are very different. The origination fee is the fee (usually a percentage of the loan) that is charged by the broker for completing the loan. (Discount) Points are what the broker (lender) receives from the bank for placing the borrower into a certain interest rate. The mortgage broker fee is rarely used, but is quoted a dollar figure as a cost to the borrower. As you can see above only two of the three are listed. However, the easiest answer to the above statement is to read the fine print. At Syndicate, we never charge an origination fee (percentage of the loan) and we rebate any discount points that we receive from the bank.You pay only a flat broker fee for our services. In addition, we have eliminated the extra junk fees that are ususally associated with large or national lenders
Answer: Usually these rates are subject to change after loan closure. Typically, immediately after loan closure. They're short term adjustable rate mortgages (ARMs) that have a nice sounding interest rate to borrowers. It is not a fixed rate. In addition, many of these loans become negative amortization loans. This means you can pay your monthly mortgage payment and end up owing more than the original loan amount.
Answer: If you see a fixed rate that is not in the area of other lenders fixed rate, you are
probably being sold an adjustable rate mortgage that is fixed for a short time. Probably a
little longer than the scenario above but just good enough to make the lender appear to
have a better rate. Answer: Perhaps the most deceptive practice in the market today. When most brokers
quote closing costs they are quoting only there cost, NOT all of the costs it takes to
close a loan. Most brokers do not quote all of the title, underwriting and closing costs
associated to complete a loan. The other concern is that they do not include all the
closing costs until closing day. They like to remind people on closing day that the
Good Faith Estimate is just that, an ESTIMATE.
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